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BioMarin (BMRN) Q3 Loss Narrows, Profit Guidance Raised

BioMarin Pharmaceutical Inc. BMRN reported narrower-than-expected loss in the third quarter of 2017 but missed estimates for sales. The biotech also raised its previously issued adjusted net income guidance for 2017.

So far this year, BioMarin’s shares have underperformed the industry. While BioMarin’s shares are down 0.4%, the industry has witnessed an increase of 3.7%.

Loss Narrower than Expected

Third-quarter loss of 7 cents per share was narrower than the Zacks Consensus Estimate of a loss of 13 cents as well as the year-ago loss of 22 cents. A one-time upfront payment received from Sarepta Therapeutics, Inc. SRPT primarily led to the narrower loss in the quarter. In July, BioMarin entered into a license and settlement agreement with Sarepta resolving the exon-skipping patent litigation. Excluding this one-time upfront payment of $31.5 million and a contingent consideration gain, adjusted loss per share was 27 cents in the third quarter.

Sales Miss

Total revenue came in at $334.1 million, up 19% from the year-ago quarter. Revenues, however, missed the Zacks Consensus Estimate of $348 million.

Quarterly Details

Product revenues were $298.8 million in the quarter, up 7% year over year.

Kuvan revenues rose 16% to $105.8 million, reflecting patient growth in North America and continued growth in the ex-North American territories acquired in 2016. The number of patients on Kuvan therapy in the United States increased 9% in the third quarter.

Naglazyme sales declined 7% year over year to $72.1 million.

Vimizim contributed $90.3 million to total revenue, up 12% year over year. However, Vimizim sales declined 12.5% sequentially.

Naglazyme and Vimzim revenues vary on a quarterly basis, primarily due to the timing of central government orders from some countries, mainly Brazil.

Earlier this month, at its R&D day, BioMarin had said that a slowdown in federal purchasing orders in Brazil have hurt Naglazyme and Vimizim product revenues in the third quarter.

Moreover, at that time, BioMarin had said that if the slowdown continues in the fourth quarter, it will only be able to meet the lower end of the total product revenue guidance ($1.25 billion and $1.3 billion, not including milestone payment from Sarepta). However, in the earnings release, BioMarin said that since the R&D day, the Brazilian Ministry of Health has initiated a purchasing process and it expects 2017 revenues to be within the guidance.

BioMarin received Aldurazyme royalties – totaling $22.4 million (down 5%) – from Sanofi’s SNY Genzyme in the quarter.

Brineura received approval for the treatment of children with CLN2 disease – a form of Batten disease – both in the United States and the EU in the second quarter. The newest drug in BioMarin’s portfolio generated sales of $3.1 million in the third quarter compared to $0.3 million in the second quarter. The company said the worldwide launch of Brineura was in-line with expectations and it achieved sales in the United States and in the European countries of Germany, France, Italy and Argentina.

Research and development (R&D) expenses declined 4.2% owning to lower spending on the Brineura program and the discontinuance of the Kyndrisa program last year. Selling, general and administrative (SG&A) expenses increased 9.8% primarily due to increased expenses related to the acquisition of international Kuvan rights, costs associated with the Brineura launch and higher stock compensation expenses.

Pipeline Update

Regarding pegvaliase, which has been developed to treat phenylketonuria (PKU), the company plans to submit a marketing application in Europe in the first quarter of 2018, slightly delayed from the end of 2017 as guided previously. In the United States, pegvaliase Biologics License Application (BLA) is currently under priority review. Last month, BioMarin announced that the FDA is not looking to hold an advisory panel meeting for the company’s BLA for pegvaliase. Earlier this month, the company said the FDA is expected to give its decision in the first half of 2018.

Meanwhile, two phase III studies (one in high dose (6e13 vg/kg) and one in mid dose (4e13 vg/kg)) on its hemophilia A candidate valoctocogene roxaparvovec (formerly BMN 270) are expected to be initiated before the end of the year. Concurrent with the earnings release, BioMarin announced that the FDA has granted Breakthrough Therapy Designation to valoctocogene roxaparvovec based on positive data from phase I/II study.

Earlier this month, BioMarin also announced that it has selected BMN 290, a small molecule drug, as its next development candidate. BMN 290 will be evaluated for the treatment of Friedreich's Ataxia (FA), a rare autosomal recessive disorder for which no disease modifying therapies are currently approved. An Investigational New Drug (IND) application to begin phase I studies is expected to be submitted in the second half of next year.

2017 Outlook

The company tightened its previously issued 2017 sales guidance. However, it raised its adjusted earnings guidance while lowering its expectations for operating costs.

BioMarin expects total revenue in the range of $1.29 −$1.32 billion (including milestone payment from Sarepta) compared with $1.285 −$1.335 billion previously.  This represents year-over-year growth of 15.5% to 18.2%.

Vimizim sales are expected in the range of $400–$420 million (previously $400–$430 million). Kuvan sales are projected in the range of $400–$420 million (previously $380−$410 million). Naglazyme sales are projected in the range of $310−$330 million (previously $300−$330 million).

Expenses related to R&D are expected within $600-$620 million, down from $610-$640 million while SG&A expenses are projected in the range of $530-$550 million, compared with $530-$560 million previously.

The bottom line, on an adjusted basis, is expected to turn positive in 2017. The company raised its 2017 adjusted net income guidance from $30 - $70 million to $60 - $80 million. Meanwhile, management is committed to profitability improvements over the longer term.

At the call, BioMarin also said it expects its present marketed products plus pegvaliase to drive the top line at a 15% compounded rate through 2020 while costs will rise at a lower level.

BioMarin carries a Zacks Rank #3 (Hold). A better-ranked stock in the biotech sector is Amgen, Inc. AMGN with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Amgen’s earnings estimates have risen over 1% in 2017 and 0.7% in 2018 over the last 30 days. The company delivered an average four-quarter positive surprise of 5.25%. Shares have risen 20.7% so far this year.

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